Moral Hazard Matters: Measuring Relative Rates of Underinsurance Using Threshold Measures
AbstractThis paper illustrates the impact of moral hazard for estimating relative rates of underinsurance and to present an adjustment method to correct for this source of bias. Individuals or households are often classified as underinsured if out-of-pocket spending on medical care relative to income exceeds some threshold. We show that, without adjustment, this common threshold measure of underinsurance will underestimate the number with low levels of insurance coverage due to moral hazard. We propose an adjustment method and apply it to the specific case of estimating the difference in rates of underinsurance among small- versus large-firm workers with full-year, employer-sponsored insurance. Using data from the 2005 Medical Expenditure Panel Survey, we find that after applying the adjustment, the underinsurance rate of small-firm households increases by approximately 20% with the adjustment for moral hazard and the difference in underinsurance rates between large firm and small firm households widens substantially. Adjusting for moral hazard makes a sizeable difference in the estimated prevalence of underinsurance using a threshold measure.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15410.
Date of creation: Oct 2009
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Find related papers by JEL classification:
- I10 - Health, Education, and Welfare - - Health - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-17 (All new papers)
- NEP-CTA-2009-10-17 (Contract Theory & Applications)
- NEP-IAS-2009-10-17 (Insurance Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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